Values in Contemporary Business: A Primer on Ethical Decision-making for BUS 302 Wayne Smith, Ph.D. Department of Management CSU Northridge

2 “Legal” and “Ethical” are sometimes similar If one is acting within the law, presumably one is acting ethically. The law defines specific duties. –Some conduct is prescribed. –Some conduct is allowed. –Some conduct is proscribed. If you are in Compliance – no further action There is formal punishment for illegal conduct. Statues and Regulations balance competing values.

3 “Legal” and “Ethical” are sometimes different Ethics offers guidance on how one should act. Addresses situations where competing values clash. Action or inaction may be controlled by a formal or an informal process. Ethics can be seen, therefore, as action beyond mere compliance to legal duty. So…what, therefore, is ethical decision-making?

How to Resolve Ethical Dilemmas in Business Identify the key ethical issue(s) Identify primary (direct) and secondary (indirect) stakeholders –You need to incorporate their positions and perspectives Use an ethical decision-making approach (this provides structure for the argument) –You need a cohesive, understandable organization (choose one of the two— Tucker or Velasquez (if not specifically provided by the instructor) Use multiple ethical decision-making theories/models/frameworks to answer each part (this provides strength for the argument) –You must base your argument in rigorous, relevant theory Compare alternatives and assess consequences –You identify all major alternatives and estimate outcomes

Ethical Decision-making Approach — Tucker Evaluate each alternative on: –Is the decision profitable (shareholders)? –Is the decision legal (society at large)? –Is it fair? –What is the impact on the rights of stakeholders? –What is the impact on sustainable development (environment)?

Ethical Decision-making Approach — Velasquez Moral Standards Approach Is the decision… –Of net benefit to society? –Fair to all stakeholders (fair distribution of benefits and burdens)? –Consistent with each person’s rights?

7 Ethical Decision-making Theories Philosophical Branches of Ethics –These are ones that have had the widest impact over time 1.Utilitarianism (“evaluated by the consequences/value”) 2.Deontology (“inherent duty”) 3.Nicomachean (“moral virtues”) Applied Branches of Ethics –These are combinations and derivatives of the first three 4.Rights Theory (“freedom, fairness, and equality”) 5.Justice Theory (“harm to a single individual”) 6.Corporate Social Responsibility (“organizational values”)

8 Ethical Decision-making Theory — Utilitarianism Definition –Utilitarianism is a branch of “Consequentialism” –We evaluate the ethical decision by its results –Jeremy Bentham, John Stuart Mill Key Decision –Benefits divided by Costs → “Best Ethical Decision” Key Question(s) –What is the greatest good for the greatest number? –What is the maximum aggregate utility for a population?

9 Ethical Decision-making Theory — (Philosophy Bites audio files) Consequentialism (“evaluated by the results”) – – consequentialism-1.html –Utilitarianism

10 Ethical Decision-making Theory — Deontology Definition –We evaluate the ethical decision by its relationship to a person’s inherent duty –Immanuel Kant, Georg Hegel Key Decision Endowments subject to Burdens → “Best Ethical Decision” Key Question(s) Categorical Imperative –What is right, fair, and just for another individual (without having to evaluate the consequences or use religion)? Reciprocity –What is the best, empathic relationship for both individuals or organizations? Enlightened Self-Interest –What improves my inherent self-interest for society?

11 Ethical Decision-making Theory — (Philosophy Bites audio files) Deontology –Categorical Imperative (Immanuel Kant) –Moral Responsibility moral-responsibility.html

12 Ethical Decision-making Theory — Rights Definition –We evaluate the ethical decision by its relationship to certain inalienable rights –John Locke, Jean-Jacques Rousseau Key Decision –Legal Rights plus Natural Rights → “Best Ethical Decision” Key Question(s) –Does this decision advance… Fair and equal treatment? Privacy and personal security? Opportunity to keep one’s wealth and property? Freedom to achieve self-actualization (e.g., life, liberty, and the pursuit of happiness)? –See also…The First 5 amendments to the U.S. Constitution

13 Ethical Decision-making Theory — (Philosophy Bites audio files) Rights – kramer.htmlhttp://philosophybites.com/2008/07/matthew- kramer.html – tasioulas-on-human-rights.html

14 Ethical Decision-making Theory — Justice Definition –We evaluate the ethical decision by its applicability to a single individual –Plato, Thomas Hobbes, John Rawls, Robert Nozick Key Decision –Best for an Individual multiplied by Best for Society → “Best Ethical Decision” Key Question(s) –Can harm to a single individual be justified? –Key Types of Justice Is the process fair and equal? (procedural justice) Is there a fair distribution of benefits and burdens? (distributive justice) Is the punishment appropriate? (retributive justice)

15 Ethical Decision-making Theory — (Philosophy Bites audio files) Justice –Categorical Imperative (Immanuel Kant) –Moral Responsibility moral-responsibility.html –Justice l_on_Justice.mp3http://traffic.libsyn.com/philosophybites/Michael_Sande l_on_Justice.mp3 –Justice (John Rawls) john-rawls-a-theory-of-justice.html

16 Ethical Decision-making Theory — Nicomachean Definition (“moral virtues”) –Courage, Temperance, Liberality, Generosity, Magnamity, Immoderation, Gentleness, Friendliness, Truthfulness, Sense of Shame, … –Aristotle, Confucius, Machiavelli (“vices”) Key Decision –Good Virtues minus Bad Vices → “Best Ethical Decision” Key Question(s) –What descriptive attributes will others ascribe to me? –As an educated person, what will others expect of me? –How will I be evaluated in the long run?

17 Ethical Decision-making Theory — (Philosophy Bites audio files) Nicomachean –Virtues –Ethics ethics.html

18 Ethical Decision-making Theory — Corporate Social Responsibility Definition (“organizational values”) –Organizational Values –Keith Davis Key Decision –Aligned with Organizational values → “Best Ethical Decision” Key Question(s) –Is this decision aligned (i.e., “consonant”) with our espoused organizational values, vision, and mission? –Duty of…Care? …Loyalty? …Diligence? …Prudence? –What are the “Systems Effects” and “Side Effects”? –“Triple Bottom Line”—financial, social, & environmental